Kevin Gilday, Gilday Design and Remodeling: “We noticed in January 2008 that people were becoming more price-conscious. One out of 20 people would say, ‘I just can’t move ahead on this.’ If you haven’t heard that for six years, you notice it big time.
“We had layoffs around the time Treasury Secretary Henry Paulson made his announcements. What client is going to hire you when somebody announces it’s the worst economy since the Great Depression? If you were thinking of even buying a couch, you said to yourself, ‘Maybe I should leave that money in the bank.’ ”
Roby Thompson, Long & Foster: “The middle of October 2008, it completely stopped. It scared the hell out of me. I went four months without a referral—from November through almost the end of February. I almost started thinking about getting another job.
“I had been averaging about $40 million in sales a year. And then in 2008 I dropped down to about $26 million. My business is all referral, and my phone stopped completely. I went through kind of a depression for a couple of months. I was like, ‘What have I done to destroy my business?’ ”
Roby Thompson, Long & Foster: “At the height of the market, you would see 40 agents in our office regularly. Throughout 2008, it was a ghost town. You were lucky to see three agents in our office at a time.”
“Timing Is Everything”
Developers and investors who got caught when the bust hit had to adjust to the new reality.
Father and son Milton and Steven Peterson of the Peterson Companies are the developers behind National Harbor in Prince George’s County.
Milton: “When we planned this, we were in a boom. We had a tremendous reception from most everybody, but there were a few people who didn’t approve, so we got held up for 20 months. That put us in the position where we opened just as the bust hit.”
Steven: “Ann Taylor said they were going to open up one store in the country, and it was going to be here. Then all of a sudden it was no stores. We said, ‘But we’ll fit you out, we’ll pay for your merchandise.’ They wouldn’t do it. We said, ‘We’ll pay for everything.’ There was no risk to them. They wouldn’t do it. You couldn’t buy deals to get people in.”
Milton: “When you’re planning, you’re always trying to be the optimist. Naturally, the boom affected our perspective of how high we could go. For example, the quality of the buildings. The promenade is granite—that’s not concrete. Just on public spaces, we probably spent an extra $15 million on things like finishes and public art.”
Steven: “Our biggest leap of faith was that we could sell high-end condos in Prince George’s County. We sold out 430 units in three months. That’s unheard of. But we had some kick-outs when the bust came. We have another 115 left to sell. If we hadn’t been delayed 20 months, we would have been sold out and settled. We would have been full-up in retail leasing. But timing is everything.”
A homeowner in Montgomery County: “When we moved here, there was a little rambler across the street. The owner tore it down and built a 10,500-square-foot house. Then he bought the house next door, leveled it, and built an even bigger home.
“He was forced to put both houses on the market. He was asking something like $2.5 million and $2.7 million in a neighborhood where the average home is $800,000 to $900,000. The houses were on the market for at least 18 months, and then they were foreclosed on in the fall. Now we have these two enormous houses on the street—they’re empty and they’re dark.”
Chris Millitello, co-owner of Arrow Bicycle, near Arts District Hyattsville, a mixed-use development still under construction: “Right after we opened, when the economy was still decent, we saw a lot of prospective business owners come down here and speak with us about opening in Hyattsville. There were a couple of restaurant owners and someone who was interested in opening a Vespa dealership. That stopped last fall; we don’t see anyone coming in anymore.”
Kim Hosen, executive director of the Prince William Conservation Alliance: “The Cherry Hill Peninsula was possibly the last large unprotected forest in Northern Virginia. It’s part of the bald-eagle habitat that you find on both sides of the Potomac River.
“Developers planned to put in something like 4,000 houses and a town center. They put in a massive road out to the 70-foot bluff that overlooks the Potomac. About 750 acres of trees were cleared. The peninsula was steeply sloped, and they flattened it. They built a golf course. And then they went bankrupt. It’s been sitting for over two years—no houses, no structures, just a road, a golf course, and dirt.
“It Wasn’t Real at First”
As prices fell, homeowners with ARMs who had counted on selling their homes or refinancing before their monthly payments increased suddenly didn’t have either option. The number of delinquent mortgages snowballed.
Kenneth Wenhold, Metrostudy: “Investors pulled out of the market and listed their homes for sale. And there were tens of thousands of investors who were doing this, so all of a sudden you had all this product hit the market. When you double the supply out there but don’t change the demand, prices are going to fall. And as you see the prices fall, more people try to jump out of the ship thinking that it’s sinking. It’s a downward spiral.”
Tisa Clark, a former Freddie Mac director: “In mid-2007, we started having people going into default at such an alarming rate. We were working 70 or 80 hours a week trying to put programs into place to keep these people in their homes. And then it spiraled out of control.”
A former broker with American Home Mortgage: “It wasn’t real at first. It was a trickle of problems at the beginning. Then the problem became the norm, where everybody was delinquent on their payments and everybody was forced to consider foreclosure.”
Gregg Busch, First Savings Mortgage: “Nobody ever expected it in Washington. A lot of people thought we were recession-proof. We were 100-percent wrong. We actually stopped lending completely in the middle of 2007. We literally shut down for two months.”